Question

Warrants exercisable at $20 each to obtain 10,000 shares of common stock were outstanding during a period when the average market price of the common stock was $25. Application of the treasury stock method for the assumed exercise of these warrants in computing diluted earnings per share will increase the weighted average number of outstanding common shares by:

Answer 1

Answer:

OUR ANSWER IS 2,000 SHARES

Explanation:

Application of treasury method is used for excising the warrants:

outstanding common shares =number of shares × excersiable price

                                                market price

                         =10,000 shares × $20

                               $25

                          =8,000 shares

After the warrant have been excersied,the increase in weighted average number of outstanding common shares is as follows:

increase in weighted average} =10,000 shares -8,000 shares

number of shares                     }

                                                       = 2,000 shares

The weighted number of outstanding common shares by 2,000 shares